Federal Exemption Guidelines for Salaried Employees Presented by Marie Davis, Esq. Landegger Baron Law Group, ALC Exclusively Representing Employers Employment Law, Advice, Litigation and Solutions www.landeggeresq.com
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About Our Speaker Marie D. Davis, Esq. Attorney with the Landegger Baron Law Group Specializes in helping businesses navigate complex employment laws Member of the Ventura County Bar Association, the Los Angeles County Bar Association Employment Law Section, and the Ventura Chamber of Commerce Received her B.A. from U.C.L.A., and J.D. from the U.C. Hastings College of Law
In order for the FLSA to apply, there must be an employment relationship between the employer and the employee
Almost every employee in the United States is covered by the FLSA Examples of employees who may not be covered Employees working for small construction companies Employees working for small independently owned retail or service businesses
Overtime Pay Covered, non-exempt employees must receive one and one-half times the regular rate of pay for all hours worked over forty in a workweek
Exemptions and Exceptions There are numerous exemptions and exceptions from the minimum wage and/or overtime standards of the FLSA
White Collar Exemptions The most common FLSA minimum wage and overtime exemption -- often called the 541 or white collar exemption -- applies to certain Executive Employees Administrative Employees Professional Employees Outside Sales Employees Computer Employees
Three Tests for Exemption Salary Level Salary Basis Job Duties
New Overtime Rule Standard Salary Level and Highly Compensated Employees On November 22, 2016, U.S. District Court Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction and thereby enjoined the Department of Labor from implementing and enforcing the Overtime Final Rule on December 1, 2016. The Department requested additional time in the appeals process to allow incoming leadership personnel adequate time to consider the issues. Standard salary level - pursuant to 29 CFR 541.600 Current Effective 12/1/2016 $455 $913 per week Highly Compensated Employee (HCE) - pursuant to 29 CFR 541.601 Current Effective 12/1/2016 $100,000 $134,004 per annum
Salary Basis Test Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) The compensation cannot be reduced because of variations in the quality or quantity of the work performed Need not be paid for any workweek when no work is performed
Deductions From Salary An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the businesses If the employee is ready, willing and able to work, deductions may not be made for time when work in not available
Permitted Salary Deductions Seven exceptions from the no pay-docking rule 1. Absence from work for one or more full days for personal reasons, other than sickness or disability 2. Absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy, or practice of providing wage replacement benefits for these types of absences 3. To offset any amounts received as payment for jury fees, witness fees, or military pay
Permitted Salary Deductions (continued) Seven exceptions from the no pay-docking rule (cont.) 4. Penalties imposed in good faith for violating safety rules of major significance 5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of written workplace conduct rules 6. Proportionate part of an employee s full salary may be paid for time actually worked in the first and last weeks of employment 7. Unpaid leave taken pursuant to the Family and Medical Leave Act
Effect of Improper Deductions An actual practice of making improper deductions from salary will result in the loss of the exemption During the time period in which improper deductions were made For employees in the same job classifications Working for the same managers responsible for the actual improper deductions Isolated or inadvertent improper deductions, however, will not result in the loss of exempt status if the employer reimburses the employee
Executive Duties Primary duty is management of the enterprise or of a customarily recognized department or subdivision Customarily and regularly directs the work of two or more other employees Authority to hire or fire other employees or recommendations as to the hiring, firing, advancement, promotion or other change of status of other employees given particular weight
20% Owner Executives The executive exemption also includes employees who own at least a bona fide 20-percent equity interest in the enterprise are actively engaged in management of the enterprise The salary level and salary basis requirements do not apply to exempt 20% equity owners
Administrative Duties Primary duty is the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer s customers Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance
Management or General Business Operations Tax Finance Accounting Budgeting Auditing Insurance Quality Control Purchasing Procurement Advertising Marketing Research Safety and Health Human Resources Employee Benefits Labor Relations Public and Government Relations Legal and Regulatory Compliance Computer Network, Internet, and Database Administration
Insurance Claims Adjusters Exempt status depends on actual job duties May be exempt if duties include Interviewing insured, witnesses, and physicians; Inspecting property damage Reviewing factual information to prepare damage estimates Evaluating and making recommendations regarding coverage of claims Determining liability and total value of a claim; Negotiating settlements Making recommendations regarding litigation
Financial Services May be exempt if duties include Collecting and analyzing information regarding the customer s income, assets, investments or debts Determining which financial products best meet the customer s needs and financial circumstances Advising the customer regarding the advantages and disadvantages of different financial products Marketing, servicing, or promoting the employer s financial products An employee whose primary duty is selling financial products does not qualify for the administrative exemption
Professional Duties Primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor
Field of Science or Learning Occupations with recognized professional status, as distinguished from the mechanical arts or skilled trades Law Theology Medicine Pharmacy Accounting Actuarial Computation Teaching Physical Sciences Architecture Chemical Sciences Engineering Biological Sciences
Exempt Medical Professions Doctors Registered Nurses Registered or certified medical technologists 3 years of pre-professional study in an accredited college or university, plus 1 year of professional study in an accredited school of medical technology Dental hygienists 4 years of pre-professional and professional study in an accredited college or university Certified physician assistants 4 years of pre-professional and professional study, including graduation from an accredited physician assistant program
Other Commonly Exempt Professions Lawyers Teachers Accountants Pharmacists Engineers Actuaries Chefs Certified athletic trainers Licensed funeral directors or embalmers
Additional Nonexempt Professions Licensed practical nurses Accounting clerks and bookkeepers who normally perform a great deal of routine work Cooks who perform predominantly routine mental, manual, mechanical or physical work Paralegals and legal assistants Engineering technicians
Recognized Field of Artistic or Creative Endeavor Music Musicians, composers, conductors, soloists Writing Essayists, novelists, short-story writers, play writers Screen play writers who choose their own subjects Responsible writing positions in advertising agencies Acting Graphic Arts Painters, photographers, cartoonists
Computer Related Occupations Primary duty is: The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; The design, documentation, testing, creation, or modification of computer programs related to machine operating systems A combination of the above requiring the same level of skills, and
Computer Related Occupations The employee must also receive either A guaranteed salary or fee of $913 per week or more, or An hourly rate of not less than $27.63 per hour
Outside Sales Primary duty is - Making sales or - Obtaining orders or contracts for services or facilities for consideration paid by customer and Customarily and regularly engaged away from the employer s place(s) of business in performing such primary duty No compensation test
Exception for Retail Commissioned Sales Employees
Overtime Exception for Retail Commissioned Sales Employees Employees of a retail or service establishment who are paid more than half their total earnings on a commission basis may be exempt from the overtime pay requirements of the FLSA
Requirements for Exception The employee must be employed by a retail or service establishment More than half the employee s total earnings in a representative period must represent commissions on goods or services Employee s total compensation divided by number of hours worked or regular rate must exceed one and one-half times the minimum wage
Requirements for Exception Unless all three conditions are met, the exception does not apply, and overtime premium pay must be paid for all hours worked over forty in a workweek at one and onehalf times the regular rate of pay
Common Errors to Avoid Assuming that all employees paid a salary are not due overtime Improperly applying an exemption Failing to pay for all hours an employee is suffered or permitted to work Limiting the number of hours employees are allowed to record
Common Errors to Avoid Failing to include all pay required to be included in calculating the regular rate for overtime Failing to add all hours worked in separate establishments for the same employer when calculating overtime due
Common Errors to Avoid Making improper deductions from wages that cut into the required minimum wage or overtime. Examples: shortages, drive-offs, damage, tools, and uniforms Treating an employee as an independent contractor Confusing Federal law and State law
The FLSA Does Not Require Vacation, holiday, severance, or sick pay Meal or rest periods, holidays off, or vacations Premium pay for weekend or holiday work A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees Any limit on the number of hours in a day or days in a week an employee at least 16 years old may be required or scheduled to work Pay raises or fringe benefits
Enforcement FLSA enforcement is carried out by Wage and Hour staff throughout the U.S Where violations are found, Wage and Hour advises employers of the steps needed to correct violations, secures agreement to comply in the future and supervises voluntary payment of back wages as applicable A 2-year statute of limitations generally applies to the recovery of back pay. In the case of a willful violation, a 3-year statute of limitations may apply
Enforcement In the event there is not a voluntary agreement to comply and/or pay back wages, the Wage and Hour Division may: Bring suit to obtain an injunction to restrain the employer from violating the FLSA, including the withholding of proper minimum wage and overtime Bring suit for back wages and an equal amount as liquidated damages
Employee Private Rights An employee may file a private suit for back pay and an equal amount as liquidated damages, plus attorney s fees and court costs
Penalties Employers who willfully violate the Act may be prosecuted criminally and fined up to $10,000 Employers who violate the youth employment provisions are subject to a civil money penalties Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalties for each such violation For current penalty amounts, see https://www.dol.gov/whd/flsa/index.htm#cmp
How NOVatime can Help Track Salaried Employee s Accruals While Salaried Employees may not be logging hours in the NOVAtime system, the accrual module is still able to track PTO accruals for salaried employees, allow PTO to accrue daily, weekly, by pay period, annually or any other timeframe. Exception based punching for salaried employees allows for nearly any accrual policy to be enforced.
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Thank you for attending! LANDEGGER BARON LAW GROUP NOVATIME TECHNOLOGY, INC. Marie D. Davis, Esq. marie@landeggeresq.com 15760 Ventura Blvd., Suite 1200 Encino, California 91436 751 Daily Drive, Suite 325 Camarillo, California 93010 Scott Rose, Enterprise Sales scott.rose@novatime.com 1440 Bridgegate Dr., Suite 300 Diamond Bar, California 91765 Headquarters: 909.895.8100 Los Angeles Office: 818.986.7561 Ventura County Office: 805.987.7128 LANDEGGER BARON LAW GROUP, ALC 46